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Computerized Investing > January/February 2006

The Magic Formula Approach to Stockpicking

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by John Bajkowski

There are many approaches to the selection and analysis of common stocks floating around the investment community, from simple value techniques to complex strategies combining a wide array of technical and fundamental factors. Many investors are initially drawn to intricate techniques, only to discover that basic, but sound, approaches often perform better and are easier to implement and understand.

Joel Greenblatt’s latest book, “The Little Book That Beats the Market” (John Wiley & Sons, Inc., 2006), has created a stir within the financial community because of his simple “magic formula” approach and promise of long-term, low-risk, market-beating performance.

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